2026 S&P 500 Outlook: Bull Run Continues with Modest Gains, Per Market Expert Jay Woods

On December 30, 2025, Benzinga published an exclusive interview with Jay Woods, Chief Market Strategist at Freedom Capital Markets, discussing the 2026 outlook for the S&P 500 and its ETF tracker SPY [1][3]. The S&P 500 had reached multiple all-time highs in 2025, including a record during the Christmas week, with 30-day (through December 29, 2025) gains of 2.86% for the index and 2.71% for SPY [0]. Woods described 2026 as a “boring, normal year” rather than a “stampede,” forecasting 3-5% returns that would leave the S&P 500 in the 7,200s—below the median Wall Street strategist target of approximately 7,650 [2]. This shift from recent double-digit gains reflects reduced market momentum and four key uncertainties: a Supreme Court ruling on President Trump’s “Liberation Day” tariffs, CPI/inflation trends, a new Fed chairman (with expected policy dissensions), and 2026 midterm elections [2][3][4]. Sector performance on December 30, 2025, showed defensive sectors Basic Materials (+0.47%) and Energy (+0.43%) leading, while Healthcare (-0.55%) and Consumer Cyclical (-0.36%) lagged, indicating early investor positioning amid uncertainty [5].

1. Market Regime Shift
   : The transition from double-digit gains to 3-5% growth in 2026 marks a shift from exuberant momentum to more normalized market conditions, driven by unresolved macroeconomic and political uncertainties [2].
2. Preemptive Defensive Positioning
   : The outperformance of Basic Materials and Energy on the interview date suggests investors are already adjusting portfolios to mitigate potential volatility from the four key uncertainties [5].
3. Interconnected Risks
   : The identified uncertainties are mutually reinforcing—for example, the Supreme Court tariff ruling could impact inflation, which in turn influences Fed policy decisions [2][3].

• Tariff Uncertainty
  : A Supreme Court ruling deeming tariffs illegal could disrupt U.S. trade, weigh on corporate earnings, and increase market volatility [2].
• Fed Policy Disruptions
  : Increased dissension among Fed officials under the incoming chair could lead to inconsistent monetary policy, eroding investor confidence [3].
• Midterm Election Volatility
  : Political gridlock or unexpected policy changes from the 2026 midterms could create short-term market fluctuations [3].
• Inflation Risks
  : Persistently high CPI data could prompt the Fed to delay interest rate cuts, limiting market gains [3].

• Defensive Sector Resilience
  : Basic Materials and Energy sectors may continue to outperform as investors seek stability amid uncertainty [5].
• Resilient Company Performance
  : Companies with strong balance sheets and global diversification could weather potential tariff and policy shocks.

• 2026 S&P 500 Forecast
  : Jay Woods (3-5% returns, ~7,200s) vs. median Wall Street consensus (~7,650) [2].
• Recent Market Performance
  : S&P 500 +2.86% (6713.61 → 6905.73) and SPY +2.71% (669.70 → 687.85) over the 30 days ending December 29, 2025 [0].
• Current Sector Trends
  : Basic Materials and Energy leading; Healthcare and Consumer Cyclical lagging (December 30, 2025) [5].
• Key Uncertainties
  : Supreme Court tariff ruling, new Fed chair, 2026 midterm elections, inflation data [2][3][4].